Investment Companies: Study Guide

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Chapter 13
Investment Company (会社型投信)

Investment Companies

A corporation or trust in which investors pool their funds and are usually organized as corporations in the same manner as any other business corporation. However, some have been established as trusts and as such are supervised by trustees rather than dir ① Diversification Advantages of Investment ② Professional Management Company ③ Liquidity The basic legistration governing investment company and difines and classifies investment companies into 3 basic types. ① Face Amount Certificate Company The Investment Company Act of ② Unit Investment Trust(UIT) 1940 ③ Management Company The Act requires all investment companies with 100 shareholders or more to register with the SEC. A public offering may not be made by a mutual fund until it has a minimum net worth of $100,000. New shares are registered by the fund periodically, usually Type of Investment Companies Face Amount Certificate Issues debt certificates offering a predetermined rate of interest. Holders are entitled to redeem Company their certificates for a fixed amount on a specified date. Investment companies with no management fee and low sales charges that invest in a fixed Unit Investment     portfolio of municipal or corporate bonds are categorized as UIT. The funds are issued in book (UIT / 単位型投資信託) entry form and registered form. Established under an indenture or simil Manage a portfolio of securities in accordance with specified investment objectives. Each day, usually at the end of trading on the NYSE, a management company will determine the value of its Management Company portfolio or the net asset value(NAV) per share. ① Closed-end ⇒ Does not issue redeemable shares ② Open-end ⇒ Issues redeemable shares Usually capitalizes through a 1-time public offering of shares and may issue commom stock, Closed-end Investment preferred stock, or bonds. The company does not continuously issue shares nor will it redeem its Company shares. The market price of closed-end funds will be based on the f Also called mutual fund. They are continuously issuing new shares which they stand ready to Open-end Investment Company redeem. All shares issued are common shares ONLY. Instead of 5% policy, sales charge will be applied. Management(investment advisory) fees are normally the largest

Chapter 13
Types of Mutual Funds Diversified Common Stock Funds Income Funds Balanced Funds Bond Funds Money Market Funds Bonds and Preferred Stock Funds Specialized Funds Operation of a Mutual Fund Board of Directors

Investment Companies
Consists mostly of common stocks. The funds can have a variety of investment objectives. One might be conservative and invest primarily in blue-chip stocks. Another might be more aggressive and invest primarily in growth stocks. Have as their investment objective high current income. Maintain some proportion of their assets in bonds and preferred stock as well as in common stock. Invest their assets solely in bonds and have as their objective stability of income. Invest in short-term debt(money market) instruments. A typical money market fund invests in CP and CDs. They generally pays the interest to the investors monthly. Invest in senior securities, both bonds and preferred stock. Their objective is current income with safety of principal. Invest a large proportion of their assets in a particular industry such as the chemical industry. Elected by the mutual fund shareholders and are responsible for developing and implementing investment policies. According to the Investment Company Act of 1940, at least 40% of the board of directors must be unaffiliated with the mutual fund. Unless authorized by majority vote of its shares, an investment company may not; ① Go from diversified to non-diversified ② Change its investment objectives and concentration of investments ③ Borrow money, underwrite securities issued by others, make loans, buy or sell real estate ④ Change the nature of business so as to...
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